Just under a third (29%) of local authorities may not be able to deliver their in-year budgetary position, while half of s151 officers are not confident in their organisation’s ability to deliver a balanced budget over the course of their medium-term financial plans (MTFP).
And more than one in ten (12%) of these officers are concerned they will need to issue a s114 notice during the MTFP period.
Those are some of the key findings of a new measure of s151 officer confidence produced by EY’s Local Government Corporate Finance practice.
The inaugural 2023 Section 151 Confidence Barometer is based on a survey of 85 s151 officers, with responses collected in November. It demonstrates a “picture of concern and uncertainty across the sector with respect to 23/24 in-year budgetary positions”, as along with the 29% of officers not confident their organisation will deliver against them, 43% said they were only ‘somewhat confident’.
This means just 28% of s151 officers are either ‘confident’ or ‘very confident’ their authority will deliver against its in-year budget position, as at period 8 within the local government financial year.
The services highlighted as driving this lack of confidence are statutory in nature. The Confidence Barometer stated that “the issues prevalent in the SEND, adults and children’s social care services sectors, along with temporary accommodation and homelessness, are now placing significant strain upon the viability and sustainability of local authority finances”.
This is compounded by the sector’s reliance on reserves “that are ever more difficult to manage in the current fiscal and economic environment”. Indeed, “the ever-greater proportion of local government resources being assigned to statutory services leaves little headroom for the sector to deliver against political priorities”, the Confidence Barometer stated.
The survey also found that 28% of the s151 officer respondents were not confident their local authority would deliver its in-year budgeted savings position, with ‘more efficient operations’ and ‘income generation’ the savings types officers were least confident of being delivered.
And 22% of respondents were not confident of their capital programme being delivered within budget this year, although 64% were either ‘confident’ or ‘very confident’.
MTFP position
The outlook over the course of the sector’s Medium Term Financial Plan (MTFP) position appears even “more bleak” than the in-year position, according to EY’s Confidence Barometer, which stated that “more radical change is required to ensure the sector maintains financially sustainable”.
“Systemic” issues such as adults’ social care and children’s services are also driving a lack of confidence in the medium-term position. As noted, 50% of s151 officers are not confident in their organisation’s ability to deliver a balanced budget over the course of their MTFP, with 36% ‘somewhat confident’ and just 14% ‘confident’.
Some 12% of s151 officers are ‘concerned’ or ‘very concerned’ they will need to issue a s114 notice during the MTFP period.
The Confidence Barometer also showed that, on average, 45% of required savings remain unidentified over the MTFP period, “indicating continued focus and the need for transformation and innovation across all services in the years ahead”.
There is also a lack of confidence in capital programmes over the medium-term, with 64% of responding s151 officers stating that they are not confident in the ability to deliver the current programme, compared to the 36% who are not confident of doing so within the current financial year.
Uncertainty over government funding was highlighted as a key contributor to concerns over the sector’s medium term financial plans with 83% of s151 officers stating that this, to a large extent or more, is a contributor to a lack of confidence in their MTFP.
Challenges ahead
EY’s Confidence Barometer also highlighted internal and external challenges at local authorities. Major concerns over increased quantity of demand for service and complexity of service demand were cited by respondents.
The former highlights a need for “radical service re-design and more preventative models”, the Confidence Barometer stated.
Almost half of respondents (48%) were not confident or only somewhat confident that statutory services could be delivered within budgetary envelopes.
The survey found that 86% of local authorities are actively implementing technology and automation solutions to streamline internal processes and reduce operational costs.
However, 71% of 151 officers lack confidence in the effectiveness of their organisation’s risk management practices.
The survey also highlighted significant concern over the current macro-economic environment and the effect it would have on service demand and the ability to manage budgets. Some 79% of s151 officers feel that their organisations are ‘unprepared’ to address the financial implications of external events.
Additionally, some 47% of s151 officers were not confident in their ability to navigate potential changes to regulatory or compliance requirements over the medium term.
An ‘enormous task’
In the foreword to the inaugural Confidence Barometer, Marcus Richards, partner at EY and Local Government Corporate Finance lead, said he hoped to present a “reflection on the enormous task section 151 officers have in ensuring the financial sustainability of their authorities”.
Richards wrote: “With the threat of section 114 issuance now almost a weekly occurrence, the Barometer seeks to provide clarity and analysis on the factors which are concerning and challenging the confidence of section 151 officers.
“The analysis reflects the risks that exist within local authorities’ in year performance, but casts an even more negative light upon performance over medium-term financial plans. It identifies some key trends across the sector, and acts as a reminder to the difficulties that lack of clarity over government funding has on local government financial sustainability, along with other external factors hampering section 151 confidence over the medium term.
“However, the Confidence Barometer also demonstrates some areas of positivity. Section 151 officers are driving internal change across their authorities, with evidence of technology and automation being implemented to help drive the efficiency and effectiveness of support service operations.”
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